Hollister city services would be out another $2 million in
previously allocated state money over the next 18 months if Gov.
Gray Davis’ proposed budget passes, according to city
officials.
Hollister city services would be out another $2 million in previously allocated state money over the next 18 months if Gov. Gray Davis’ proposed budget passes, according to city officials.
In light of this potential local impact, the City Council passed a resolution Tuesday showing official support for a bill – a tax hike – designed to compensate for the loss. As of press time Thursday, the vote had not been taken.
Another example of cuts at the local level to amend the state’s reported $35 billion budget deficit, Davis’ proposal includes diverting $4 billion in “Vehicle Licensing Fee backfill” away from jurisdictions throughout the state.
“It could get ugly, really ugly,” said Barbara Mullholland, Hollister’s finance director.
The problem stems from 1998 legislation and involves the Vehicle License Fee – essentially the cost to residents who register a vehicle each year. During the economically prosperous late 1990s, the state decided to reduce individual VLF payments but has since compensated by allocating funding from its General Fund to cities such as Hollister.
With the impending budget crisis, Davis said he will reallocate that VLF backfill to the state. Mulholland said Hollister’s $2 million portion of the backfill over the next 18 months would be 13 to 14 percent of the city’s General Fund.
“That’s a lot of money,” Mullholland said. “That’s a lot of services.”
To put the situation in perspective, she said the entire annual budget of the city finance department is $800,000 while the police department’s is $4 million and the fire department’s is $3 million.
The $2 million in potential losses would otherwise contribute to all city departments or programs, other than issues involving sewer, water, the airport or the redevelopment agency.
According to the bill in the Assembly supported by the Council – an amendment to the Vehicle License Fee Law – the San Benito County Department of Motor Vehicles and other DMVs throughout the state would raise registration fees back to 1998 levels to compensate for the absence of $4 billion statewide. That would mean the annual tax on vehicle registration would go from its current .65 percent of the vehicle’s value to 2 percent.
Overall, it would mean a huge raise in registration fees. Mullholland, for instance, said her annual fee would jump from $125 to $375.
But Councilman Tony Bruscia, who’s outspoken on the issue, said the compromise – the higher tax – would be well worth it.
“If people understand the details of the situation, they’ll agree,” Bruscia said.
Others, such as Councilman Tony LoBue, disagree with raising the VLF tax hike. LoBue was the lone Councilmember Tuesday to vote against the resolution to support the bill.
Mullholland said Gov. Davis has made it clear he will not change his mind on reallocating the $4 billion from the state’s local jurisdictions. So raising the VLF tax – or otherwise accepting the loss of city services – are the only options.
“That’s the only way,” Mullholland said.
Bruscia said until he recently became more involved with the League of Cities he did not understand the extent of the state’s budget problems.
“We (the state) have to stop committing to spending money we don’t have,” Bruscia said.
The $2 million is only one portion of the potential losses to Hollister if Davis’ budget goes through. The Redevelopment Agency also stands to lose a significant chunk – up to $5 million – of state-allocated money.
“We’re in a world of hurt,” Councilman Robert Scattini said. “We all have to suck it up.”
